Not enough Hong Kong-listed companies are conducting due diligence before deals, accounting firm Grant Thornton says
- Study also highlights level of economic integration between Hong Kong and neighbouring cities in Pearl River Delta
- International law firm Baker McKenzie said last week deal makers often ‘significantly’ underresourced compliance and due diligence
Only 41 per cent of business transactions disclosed by Hong Kong-listed companies last year included detailed investigations into the assets and operations being traded, accounting and audit firm Grant Thornton said on Wednesday.
A study by the firm of all corporate transaction announcements filed to the city’s stock exchange by publicly listed companies last year, also found that about 30 per cent of all China deals pertained to assets in the “Greater Bay Area”.
The numbers highlighted that not enough companies were conducting due diligence into assets and people of businesses being bought as a condition for completion.
“We recommend directors seek professional advice on due diligence, company restructuring and organisation, [assets] valuation as well as [performance] assurance clauses in sales and purchase agreements before executing a transaction, so as to identify any potential issues ahead of completion, as well as achieving a successful outcome,” said Barry Tong, Grant Thornton’s Asia-Pacific head of transaction advisory services.
The study also highlighted the level of economic integration between Hong Kong and its neighbouring cities in China’s Pearl River Delta.
“The Greater Bay Area, as China’s new growth engine, is increasingly under the spotlight … we believe the number of business transactions [here] will continue to grow, and mainland China will remain the major market for business transactions in 2019.”